Jim Crow and Monopoly Money


Welcome to BIG, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on…

First, someone who bought my book on Amazon sent me this screenshot, which shows Amazon is saying customers who buy Goliath are also buying toilet seats with “grip tight bumpers.” There are jokes I could make, but I will not do so. You’re welcome. If you buy Goliath off Amazon (no judgment!), let me know what weird stuff Bezos tells you to include with your order.

The theme of today’s issue is race and monopoly, and in particular, the political economy of the Jim Crow system of violently enforced racial apartheid that stretched across the American south from the late 1890s until the 1960s.

First, in case you’re interested in seeing me alive and talking instead of as a disembodied voice in your inbox, I was on TheHill.TV with Krystal Ball and Saagar Enjeti to discuss China and monopoly power.

The China-NBA story isn’t over, by a long shot, and I suspect, as I told Tobias Hoonhout at the National Review, corporate America will now be empowered to stand up to China. Anti-monopoly Republican Senator Josh Hawley announced he is going to Hong Kong, and Democrats are beginning to reframe their approach to China.

And now…

The Atlanta Compromise and Jim Crow

I just wrote a book on monopoly power, and one of the core questions that I wrestled with as I researched was racial identity and monopoly power. I don’t think I was fully successful, but to be fair, it’s a hard problem. In historian Gerald Berk’s review of my book in The American Prospect, he identifies this lack as one of the flaws in the book, and points out that we need a lot more historical research on the relationship between social identity and economic power. Berk is one of the best business historians alive today, and I take his views quite seriously.

As Berk notes, there is no consensus on the relationship between the anti-monopoly tradition and social identity. The basic thinking behind anti-monopolists is what is known as producerism, or the notion that some produce and should reap the fruits of that production, while others feed off the production of others. Democrat Elizabeth Warren and Republican Josh Hawley, both Senators, have producer-ist philosophies

Berk notes that producer-ism is the essence of American egalitarianism, but it can also carry dangerous and fascist elements. As he writes, “anti-monopoly’s producerist ideology can look down as readily as up to identify adversaries. When it does, immigrants, African Americans, and women are coded as nonproducers alongside bankers and monopolists, equally worthy of vilification, regulation, and exclusion.”

But Berk also shows that anti-monopolists have a strong history of inclusivity around identity, referencing “studies of black chapters of the Farmers’ Alliance by Lawrence Goodwyn, Gretchen Ritter, and Omar Ali; the importance of antitrust in protecting black businesses which supported the civil rights movement by Brian Feldman; and anti-monopoly support for Native Americans in Portland, Oregon, by Robert Johnston show how anti-monopoly and racial movements work together toward interracial freedom from economic oppression.”

There is a fascinating question here about anti-monopoly movements and racial justice movements. But there is also another side of this bargain, which is the relationship between monopolists and racial oligarchy.

One of the most important books ever written about American history is W.E.B. Du Bois’s Black Reconstruction, published in 1935. In that book, Du Bois took on the mainstream of American historical thought about the post-Civil War Reconstruction era. At the time Du Bois wrote, most white Americans believed that Reconstruction was a disaster, with ‘carpetbaggers’ from the North aligning with black ex-slaves to take power and act irresponsibly and corruptly in Southern states. The very first film blockbuster, Birth of a Nation, told the story of this ‘Lost Cause’ history, honoring the aims of the Confederacy, and valorizing the post-war Ku Klux Klan as heroic. This history was not true; immediate post-Civil War legislatures, with both black and white representatives, did things like construct public schools and tax the rich.

Du Bois pointed out that the Lost Cause myth was constructed for economic reasons. It helped solidify the post-war dominance of Northern industrialists, many of whom were stretching railroads around the nation and beginning to assert monopoly power. These Northern financiers, having been supportive of the Union cause, after the war began building alliance with southern white conservatives, with ex-slaves, poor whites, Northern immigrants to the south, ex-planters, and free labor industrialists in a swirl of post-war political chaos. From the end of the war in 1865 until the first major downturn, which started in 1873, there was a fertile battle over political power, which ended with a banking panic set off by railroad over-building and the fall of Jay Cooke’s bank.

Here’s how Du Bois put it.

For a brief period—for the seven mystic years that stretched between Johnson's "Swing round the Circle" to the Panic of 1873, the majority of thinking Americans of the North believed in the equal manhood of Negroes… They simply recognized black folk as men…

Then came in 1873-76 sudden and complete disillusion not at Negroes but at the world—at business, at work, at religion, at art. A bitter protest of Southern property reenforced Northern reaction; and while after long years the American world recovered in most matters, it has never yet quite understood why it could ever have thought that black men were altogether human.

This depression happened because Cooke was over-leveraged, and because the Federal government imposed massive austerity through a return to the gold standard. The downturn had important implications for racial attitudes, monopoly capital, and the very possibility of democracy itself. The crash caused the anti-slavery Republicans to lose their hold over Congress, and began the organization of an ideology that came to fruition in the late 1800s and early 1900s with the establishment of Jim Crow and J.P. Morgan’s great merger wave of 1895-1904.

Despite the downturn, the Jim Crow system didn’t start immediately after Reconstruction ended in 1877. If black men could not be social equal to whites after 1877, the argument about whether they could still have political power was not settled until 1895, nearly 20 years later. As C. Vann Woodward noted in his classic The Strange Career of Jim Crow, wholesale segregation was often seen as irrational by southern conservatives, who would have to construct separate facilities that did not exist during the antebellum plantation era. But multi-racial farmer movements of populists in the 1880s and 1890s, as well as bitter strikes like the 1892 Homestead strike in Pennsylvania, terrified both northern monopolists and southern conservatives, who cemented an alliance that became the Jim Crow system of autocracy.

An important figure in this deal was conservative thinker Booker T. Washington, the most important black leader since Frederick Douglass. Washington ran what was known as the “Tuskegee Machine,” and in 1895, he gave a speech called the Atlanta Compromise, which was widely interpreted as black southerners acceding to the deal between Southern conservative whites and Northern monopolists. Washington, importantly, accepted the Lost Cause history. Here’s what he said.

Ignorant and inexperienced, it is not strange that in the first years of our new life we began at the top instead of at the bottom; that a seat in Congress or the state legislature was more sought than real estate or industrial skill; that the political convention or stump speaking had more attractions than starting a dairy farm or a truck garden.

In this deal, blacks would give up political rights and the right to gain higher positions in commerce, in return for ‘industrial education’ in farming and business and the protection of commercial rights of black business people and workers.

Southern blacks, and Booker T. Washington, were in an extraordinarily difficult situation in the 1890s, beset by virulently racist whites and concentrated capital hostile to liberty. Washington’s strategy was a conservative accommodation to power, an attempt to wrest what he could. In return, his Tuskegee University was financed richly by Northern monopolists. As historian David Levering noted,

Andrew Carnegie astounded American higher education in 1903 with his six-hundred-thousand-dollar endowment gift to Tuskegee, and from John D. Rockefeller Sr.’s deep pockets a ten-thousand-dollar annuity had been paid since the 1890s to Tuskegee.

The very next year after the Atlanta Compromise speech, two pivotal events occurred. There was the titanic election of 1896, in which the farmer populist William Jennings Bryan lost to the banker supported William McKinley. And then there was of course there was the Supreme Court case of Plessy vs. Ferguson, which solidified Jim Crow.

While Washington was the dominant black political leader in the 1890s, the Atlanta Compromise was a disaster for African-Americans. Much of the new legal apartheid system and its violent extra-legal terrorist enforcement mechanisms were, as economist Lisa Cook shows, targeted at black economic power. The failure of accommodation to deliver even an iota of social justice was a core reason Washington’s influence began sagging in the 1900s.

Du Bois got his start as an activist and intellectual in the 1890s. He soon broke with Washington, and helped form the NAACP in 1911 as a competitor to Washington’s Tuskegee Machine. The NAACP was put together by a group of white and black progressives who sought political equality (though the white leaders of the organization did not, at first, want social equality).

With Black Reconstruction, Du Bois’s thinking about how to organize opposition to Jim Crow eventually became dominant, soon to be reflected in the Civil Rights movement of the 1950s. His historical take was a critical part of revisiting the Jim Crow deal, and its underlying myths. For instance, the lawyer for the losing side of Plessy vs Ferguson - Albion Tourge - had been a hero of Reconstruction, in Du Bois’s telling. Not only was Tourge a great civil rights proponent, but by the 1890s he had become a fierce anti-monopolist as well. Racial oligarchy and plutocracy were, as he and Du Bois realized, a political union. (Tourge is also a hero in Harvard Business School professor Laura Phillip Sawyer’s book on the politics of small business, American Fair Trade)

In many ways, battles in the 20th century over political economy, like Teddy Roosevelt’s New Nationalism, Woodrow Wilson’s New Freedom, and most importantly, the New Deal and the Civil Rights movement, were ways of wrestling with the fundamental bargain struck of Jim Crow in the mid-1890s, the entrenchment of fascism in the United States along racial lines in the South, supported, at least tacitly, by monopolists in the North.

There’s a lot more here, of course, and I’m quite curious what you think. Berk’s observation about race and the anti-monopoly tradition still holds, we need a lot more historical research in this area. I also highly recommend Richard White’s Railroaded on Western railroads, and Josh Hawley’s book on Teddy Roosevelt. Hawley’s book covers the racialist legacy of the late 19th century American elite and its relationship to the creation of corporate America.

Thanks for reading. And if you liked this essay, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you want to really understand the secret history of monopoly power, buy my upcoming book, Goliath: The 100-Year War Between Monopoly Power and Democracy.


Matt Stoller

News Update

I haven’t done one of these in awhile. I’m trying to figure out how to format this newsletter, so I’ll stick this here for now.

Why the NBA Kowtowed to China (National Review)

Northern California faces massive power outage as PG&E hedges wildfire risk (Washington Post)

Private Equity Chases Ambulances (The American Prospect)

Boeing 737 Max Safety System Was Vetoed, Engineer Says (New York Times)

Everything Is Private Equity Now (Bloomberg)

Why the PG&E Blackouts Spared California's Big Tech HQs (Wired)